“Some big state-owned enterprises are doing well as there is speculation that the government will accelerate their consolidation to improve efficiency and boost infrastructure spending to further bolster economic growth.”

The upbeat outlook helped push Shanghai up 1.2 percent by the close, while Hong Kong was one percent higher.

In early European trade London gained 0.4 percent while Frankfurt and Paris each increased 0.3 percent.

On currency markets the dollar retreated after a promising start that was fuelled by growing expectations of a US interest rate rise by year-end.

With the US economy showing increasing signs of recovery, experts say a Federal Reserve increase in December is all but certain. However, traders cashed in after the greenback’s morning gains.

In afternoon Asian trade the dollar was well down from the 104 yen levels flirted with earlier, while the pound climbed back above $1.22.

The euro edged up but was also struggling after Friday’s sell-off fuelled by speculation the European Central Bank would unveil fresh stimulus measures in December.

– US election in focus –
The US unit was also down against most high-yielding and riskier currencies, having been up in the morning. The Australian dollar, South Korean won and Malaysian ringgit all rebounded healthily. But the yuan fell to a six-year low against the dollar.

Speeches by several Fed officials later in the week will be pored over for more clues about the bank’s plans for rates, particularly the pace of any further rises next year.

Dealers are also keeping an eye on the upcoming US presidential election.

While market favourite Hillary Clinton is well ahead in most opinion polls, Stephen Innes, a senior trader at OANDA, warned of an equity rout if they are wrong and her firebrand opponent Donald Trump wins on November 8.

On oil markets both main contracts were virtually flat.

Iraq’s oil minister that it should be exempted from OPEC’s planned output cut because it is waging a war with Islamic State. However, that was weighed by comments by Saudi Arabia’s oil minister, that the current cycle of falling prices is close to an end as market fundamentals improve.

In Seoul troubled shipping company Hanjin collapsed almost 14 percent at one point after it said it would close its European business.

The firm said it had applied for court approval to close all of its European units in more than 10 countries including Germany, where it has its regional headquarters. It finally closed down 11.8 percent.